EIS explained: the bigger sibling of SEIS, and when your company outgrows the small scheme

If SEIS is the scheme for a company’s first outside money, the Enterprise Investment Scheme — EIS — is the one that carries a UK startup through its next few rounds. It works on the same principle: investors get tax relief for buying new shares in risky, unlisted trading companies, which makes them more willing to invest.

How the relief works

Investors in EIS-qualifying shares can claim income tax relief at 30 per cent of the amount invested, up to £1 million invested per tax year — £2 million if the excess goes into knowledge-intensive companies. Shares held for three years are generally exempt from capital gains tax on disposal, and EIS also offers deferral relief, letting investors postpone existing capital gains by reinvesting them into EIS shares.

Who qualifies

The company must be unquoted, carrying on a qualifying trade, with gross assets of no more than £15 million before the share issue (£16 million immediately after) and fewer than 250 full-time equivalent employees. The critical timing rule: the shares must generally be issued within seven years of the company’s first commercial sale. Knowledge-intensive companies — broadly, those spending heavily on R&D or holding significant IP — get wider limits and a longer window.

The process mirrors SEIS

As with SEIS, you can apply for advance assurance before raising, issue the shares, then file a compliance statement (form EIS1) for each issue. Investors claim relief using the certificates you provide. The same broad exclusions apply to the trade itself, and the same claw-back risk hangs over the company if it breaches the conditions within three years of issue.

Full details — including the knowledge-intensive company tests and the risk-to-capital condition — are on the EIS pages on gov.uk. The numbers in this article are correct at the time of writing but do change in budgets.

What investors look for at this stage

EIS investors are writing larger cheques than SEIS angels, and they expect more substance: evidence that customers want the product, a believable use of funds, and a team that can survive the gap between this round and the next. The tax relief gets you the meeting. It does not get you the money.

What changes when you scale past it

Companies that outgrow EIS limits — more than £15 million in gross assets, past the seven-year window, or raising more than £5 million a year — move into the territory of venture capital proper, where the tax-relief story no longer applies. That transition matters to founders: institutional investors will still care about your EIS history, because relief claimed on earlier rounds is part of the cap table story and the diligence file. Keep the compliance paperwork from every round; it gets requested.

It is also worth knowing that a company can stop qualifying mid-round. If you breach the conditions — a change of trade, a takeover, too many employees — relief already granted can be clawed back within the three-year window. The filing obligations do not end when the money lands.